Protect Yourself From the Bailout

There was an excellent--and quite refreshing--editorial published in the Boston Herald on Thursday: Bad borrowers send rest of us to poorhouse.

Columnist Michael Graham doesn't focus on why the bailout is a bad idea for the economy as a whole (it is, but that's another story entirely). Instead, he draws attention to the injustice of using the tax dollars of responsible Americans to bail out those who bought more house than they could afford.

All I can say is "Amen!" And I'm not even religious.

After all, we don't bail out gamblers who get themselves into debt. But if you choose to gamble on future interest rates by taking out an ARM, why is it someone else's responsibility to bail you out if your gamble goes bad?

It's important to remember here that although those who lose their homes will no longer be homeowners, they will not become homeless. There's a glut of rental properties in most parts of the country, and right now it's far cheaper to rent than to own. Even in spendy Seattle, I calculated that my most recent rental house would cost me 2.5 to 3.0 times more each month if I owned rather than rented--assuming, of course, that you factor in a 30-year, fixed-rate loan and add in the costs of insurance, property taxes, and a few thousand a year for maintanence and repairs.

I mention all this in a post about personal finances because there are a myriad of ways the bailout is bad for your pocketbook (look for more in future posts). To protect your hard-earned tax dollars, the most important thing you can do right now is tell your politicians what you think. Tell them at the state and federal level, because some states are trying to craft their own localized bailouts.

And while you're at it, write or call the Democrat and Republican candidates too. With the exception of Ron Paul, all the candidates on both sides of the political fence are supporting some form of a bailout. Those who got themselves in over their head are the minority, but they're the ones who are screaming the loudest right now--and the politicians are listening. It's time for the rest of us to shout back.